The retromer protein complex assists in recycling selected integral membrane proteins from endosomes to the trans Golgi network. One protein subcomplex (Vps35p, Vps26p and Vps29p) combines with a second (Vps17p and Vps5p) to form a coat involved in sorting and budding of endosomal vesicles. Yeast Vps35p (yVps35) exhibits similarity to human Vps35 (hVps35), especially in a completely conserved PRLYL motif contained within an amino‐terminal domain. Companion studies indicate that an R98W mutation in yVps35 causes defective retromer assembly in Saccharomyces cerevisiae. Herein, we find that the expression of hVps35 in yeast confers dominant‐negative vacuolar proenzyme secretion and defective secretory proprotein processing. The mutant phenotype appears to be driven by hVps35 competing with endogenous yVps35, becoming incorporated into defective retromer complexes and causing proteasomal degradation of endogenous Vps26 and Vps29. Increased expression of yVps35 displaces some hVps35 to a 100 000 × g supernatant and suppresses the dominant‐negative phenotype. Remarkably, mutation of the conserved R107W of hVps35 displaces some of the protein to the 100 000 × g supernatant, slows protein turnover and restores stability of Vps26p and Vps29p and completely abrogates dominant‐negative trafficking behavior. We show that hVps35 coprecipitates Vps26, whereas the R107W mutant does not. In pancreatic beta cells, the R107W mutant shifts hVps35 from peripheral endosomes to a juxtanuclear compartment, affecting both mannose phosphate receptors and insulin. These data underscore importance of the Vps35 PRLYL motif in retromer subcomplex interactions and function.